Case 3:15-md CRB Document 1688 Filed 07/26/16 Page 1 of 32 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

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1 Case :-md-0-crb Document Filed 0// Page of UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA 0 IN RE: VOLKSWAGEN CLEAN DIESEL MARKETING, SALES PRACTICES, AND PRODUCTS LIABILITY LITIGATION / This Order Relates To: ALL CONSUMER AND RESELLER ACTIONS / MDL No. CRB (JSC) ORDER GRANTING PRELIMINARY APPROVAL OF SETTLEMENT 0 Just a little over 0 months ago, the public learned of Volkswagen s allegedly deliberate use of a defeat device software installed in certain Volkswagen- and Audi-branded turbocharged direct injection ( TDI ) diesel vehicles that was designed to cheat emissions tests and deceive state and federal regulators in nearly 00,000 cars sold in the United States. Consumers filed hundreds of lawsuits which have been assigned to this Court as a multidistrict litigation ( MDL ). After five months of intensive negotiations, and with the assistance of a Court-appointed Settlement Master, Plaintiffs and Defendants Volkswagen AG, Audi AG, and Volkswagen Group of America, Inc. (collectively, Volkswagen ) reached a settlement that resolves consumer claims concerning certain.0-liter diesel TDI vehicles. (See Dkt. No..) The Settlement Class Representatives now move the Court to () preliminarily approve the proposed Amended Consumer Class Action Settlement Agreement and Release ( Settlement ) (see Dkt. No. ), () conditionally certify a Consumer Class, () approve their proposed settlement notice plan (see Dkt. Nos. 0-, 0), and () schedule a fairness hearing. Having reviewed the proposed settlement and with the benefit of oral argument on July, 0, the Court GRANTS the Motion for Preliminary Approval. The Settlement is sufficiently fair, adequate, and reasonable to the.0-liter diesel engine vehicle consumers to move forward with

2 Case :-md-0-crb Document Filed 0// Page of class notice. I. BACKGROUND 0 0 A. Factual Allegations In 00, Volkswagen began selling its Volkswagen- and Audi-branded TDI clean diesel vehicles, which they marketed as being environmentally friendly, fuel efficient, and high performing. Unbeknownst to consumers and regulatory authorities, Volkswagen installed in these cars a defeat device software that bypasses, defeats, or renders inoperative certain elements of the vehicles emissions control system thus evading United States Environmental Protection Agency ( EPA ) and California Air Resources Board ( CARB ) emissions test procedures. Specifically, the defeat device senses whether the vehicle is undergoing testing and produces regulation-compliant results, but operates a less effective emissions control system when the vehicle is driven under normal circumstances. By installing the defeat device on its vehicles, Volkswagen was able to obtain Certificates of Conformity ( COCs ) from EPA and Executive Orders ( EOs ) from CARB for its.0- and.0-liter diesel engine vehicles when in fact these vehicles release nitrogen oxides ( NOx ) at a factor of up to 0 times over the permitted limit. Over the course of six years, Volkswagen sold American consumers nearly 00,000 diesel vehicles equipped with a defeat device. B. Procedural History On September, 0, Volkswagen admitted to EPA and CARB that it installed defeat devices on its model year 00 through 0 Volkswagen and Audi diesel vehicles equipped with.0-liter engines. On September, 0, the public became aware of the defeat device when EPA issued a Notice of Violation ( NOV ) to Volkswagen, alleging that Volkswagen s use of the defeat device violated provisions of the Clean Air Act, U.S.C. 0 et seq. That same day, CARB sent Volkswagen a letter notifying them that CARB had commenced an enforcement investigation concerning the defeat device. Two months later, EPA issued a second NOV to Volkswagen, as well as Dr. Ing. h.c. F. Porsche AG ( Porsche AG ) and Porsche Cars North America, Inc. ( PCNA ), which alleged Volkswagen had installed in its.0-liter diesel engine vehicles a defeat device similar to the one

3 Case :-md-0-crb Document Filed 0// Page of 0 0 described in the September NOV. CARB likewise sent a second letter concerning the same matter.. Consumer Actions Consumers nationwide filed hundreds of lawsuits after Volkswagen s use of the defeat device became public, and on December, 0, the Judicial Panel on Multidistrict Litigation ( JPML ) transferred related actions, including numerous putative class actions, to this Court for coordinated pretrial proceedings in the above-captioned MDL. (Dkt. No..) The JPML has since transferred an additional actions to the Court. (Dkt. No..) The following month the Court appointed Elizabeth J. Cabraser of Lieff, Cabraser, Heimann & Bernstein, LLP as Lead Plaintiffs Counsel and Chair of the Plaintiffs Steering Committee ( PSC ), to which the Court also named attorneys. (Dkt. No. 0.) On February, 0, the PSC filed its Consolidated Consumer Class Action Complaint against Defendants: VWGoA; VWAG; Audi AG; Audi of America, LLC; Porsche AG; PCNA; Martin Winterkorn; Mattias Müller; Michael Horn; Rupert Stadler; Robert Bosch GmbH ( Bosch GmbH ); Robert Bosch, LLC ( Bosch LLC ); and Volkmar Denner. (Dkt. No. 0.) The Consolidated Complaint asserts claims under () the Racketeer Influenced and Corrupt Organizations Act, U.S.C. (c)-(d), and the Magnusson-Moss Warranty Act, U.S.C. 0 et seq.; () state fraud, breach of contract, and unjust enrichment laws; and () all fifty States consumer protection laws. (Id. -.). Government Actions This MDL also includes two actions brought by federal government entities. The United States Department of Justice ( DOJ ) on behalf of EPA has sued VWAG; Audi AG; VWGoA; Volkswagen Group of America Chattanooga Operations, LLC ( VW Chattanooga ); Porsche AG; and PCNA for claims arising under Sections 0 and 0 of the Clean Air Act, U.S.C. and. The Federal Trade Commission ( FTC ) has also brought an action against VWGoA. The FTC brings its claims pursuant to Section (b) of the Federal Trade Commission Act ( FTC Act ), U.S.C. (b), and alleges violations of Section (a) of the FTC Act, U.S.C. (a). //

4 Case :-md-0-crb Document Filed 0// Page of 0. PSC, DOJ, and FTC Settlement Negotiations In January 0 the Court appointed former Director of the Federal Bureau of Investigation Robert S. Mueller III as Settlement Master to oversee settlement negotiations between the parties. (Dkt. No..) Settlement talks began almost immediately, and by April, 0, the parties reached agreements in principle regarding.0-liter diesel engine vehicles. (Dkt. No. at :-:.) On June, 0, the DOJ, the PSC, and the FTC filed a Partial Consent Decree, proposed Class Action Settlement, and Partial Consent Order, respectively. (Dkt. Nos. 0-0.) The PSC subsequently filed an Amended Settlement on July, 0. (Dkt. No..) The amendment made slight modifications to the class definition. Negotiations concerning.0-liter diesel engine vehicles remain ongoing. II. SETTLEMENT TERMS 0 This Order addresses the proposed Amended Class Action Settlement. The key provisions of that Settlement are as follows. A. The Settlement Class The proposed Settlement Class consists of a nationwide class of all persons (including individuals and entities) who, on September, 0, were registered owners or lessees of, or, in the case of Non-Volkswagen Dealers, held title to or held by bill of sale dated on or before September, 0, a Volkswagen or Audi.0-liter TDI vehicle in the United States or its territories (an Eligible Vehicle ), or who, between September, 0, and the end of the Claim Period, become a registered owner of, or, in the case of Non-Volkswagen Dealers, hold title to or hold by bill of sale dated after September, 0, but before the end of the Claims Period, an Eligible Vehicle in the United States or its territories. (Dkt. No...) Eligible Vehicles consist of Model Year 00 through 0 Volkswagen and Audi light-duty vehicles equipped with.0-liter TDI engines that are () covered, or purported to be covered, by the EPA Test Groups in the table immediately below this paragraph; () registered with a state Department of Motor Vehicles or equivalent agency or held by bill of sale by a non-volkswagen Dealer in the United States or its territories as of June, 0; () for an Eligible Owner, currently Operable or cease to be Operable only after the Opt-Out Deadline; and () have not been modified pursuant to an Approved Emissions Modification.

5 Case :-md-0-crb Document Filed 0// Page of 0 0 (Id...) Eligible Vehicles do not include Volkswagen or Audi vehicles that were sold outside the United States. (Id.) Class Members are further categorized as Eligible Lessees, Eligible Owners, or Eligible Sellers. An Eligible Lessee is () the current lessee or lessees of an Eligible Vehicle with a lease issued by VW Credit, Inc.; () the former lessee or lessees of an Eligible Vehicle who had an active lease issued by VW Credit, Inc. as of September, 0 and who surrendered or surrenders the leased Eligible Vehicle to Volkswagen; or () the owner of an Eligible Vehicle who had an active lease issued by VW Credit, Inc. as of September, 0, and who acquired ownership of the previously leased Eligible Vehicle at the conclusion of the lease after June, 0. (Id...) An Eligible Owner refers to the registered owner or owners of an Eligible Vehicle on June, 0, or the registered owner or owners who acquire an Eligible Vehicle after June, 0, but before the end of the Claim Period, except that the owner of an Eligible Vehicle who had an active lease issued by VW Credit, Inc. as of September, 0, and purchased an Eligible Vehicle previously leased by that owner after June, 0, shall be an Eligible Lessee. (Id..0.) Finally, an Eligible Seller is one who purchased or otherwise acquired an Eligible Vehicle on or before September, 0, and sold or otherwise transferred ownership of such vehicle after September, 0, but before June, 0. (Id...) Eligible Sellers are also any owner () who acquired his, her, or its Eligible Vehicle on or before September, 0, () whose Eligible Vehicle was totaled, and () who consequently transferred title of his, her, or its vehicle to an insurance company after September, 0, but before June, 0. (Id.) B. Consumer Remedies The Settlement gives Class Members choices as to remedies. Eligible Owners have two options: Volkswagen will pay cash ( Owner Restitution ) and either () buy the Class Member s Eligible Vehicle at its pre-defeat device disclosure value, ( the Buyback ) or () fix the Class Member s vehicle when and if EPA and CARB approve an emissions modification (a Fix ). The schedule for Volkswagen to submit proposed Fixes can be found in Exhibit to the Settlement (Dkt. No. - at -) and the Long Form Notice (Dkt. No. - at ).

6 Case :-md-0-crb Document Filed 0// Page of 0 0 Eligible Lessees may () terminate their leases without penalty plus receive additional cash ( Lessee Restitution ), or () if a Fix is approved, have their leased car fixed plus receive Lessee Restitution. Finally, Eligible Sellers, that is, consumers who sold their Eligible Vehicle prior to the filing of the proposed Settlement, receive cash ( Seller Restitution ). In general, the condition of the Eligible Vehicle is irrelevant; however, the Vehicle must be operable (i.e., driven under its own power). The Settlement requires Volkswagen to render those Eligible Vehicles returned in a Buyback inoperable by removing and recycling, to the extent permitted by law, the vehicle s Engine Control Unit. (Dkt. No....) Volkswagen cannot render the vehicle operable until the vehicle has received a Fix; only under those circumstances does the Settlement permit Volkswagen to re-sell the Eligible Vehicle in the United States or export it. (Id.; see Dkt. No ) In other words, the Settlement ensures that the defective vehicles will not operate in the United States or anywhere else in the world unless and until they are fixed in a manner approved by EPA and CARB.. Base Value and Vehicle Value The amount of cash a Class Member receives depends on an Eligible Vehicle s Base Value or Vehicle Value. Base Value refers to, where available, the Clean Trade value of the vehicle based on the National Automobile Dealers Association ( NADA ) Vehicle Identification Code ( VIC ) for each Eligible Vehicle in the September 0 NADA Used Car Guide published in or around August 0. (Dkt. No..; Dkt. No. -.) In some instances, like with Model Year 0 Eligible Vehicles, no value was published by NADA as of September 0. For those Eligible Vehicles, the Base Value is calculated by multiplying the Manufacturer s Suggested Retail Price ( MSRP ) for each individual vehicle by 0.. (Id. (both).) The 0. figure is the ratio of average September 0 Clean Trade values to average MSRPs for Model Year 0 Passats. (Dkt. No. -.) Vehicle Value refers to the Eligible Vehicle s Base Value, adjusted for Original Equipment Manufacturer ( OEM )-installed options and mileage. (Id..) Options adjustments to Base Values are determined by using Volkswagen OEM-installed options, as valued by the September

7 Case :-md-0-crb Document Filed 0// Page of NADA Used Car Guide. (Id. (a).) Mileage adjustments to Base Values are determined by the actual mileage at the time the vehicle is surrendered in the Buyback or brought in for a Fix using the mileage adjustment table in the September 0 NADA Used Car Guide with an allowance for standard NADA mileage of,00 miles per year, prorated monthly from September 0 to the month of surrender. (Id. (b).). Restitution Calculation Eligible Owners who purchased their Eligible Vehicles before September, 0 are entitled to a minimum Restitution Payment of $,00. (Dkt. No. - (a); Dkt. No. - at.) Restitution is calculated by adding () 0% of the Vehicle Value plus () the greater of $,. or the amount necessary to ensure that Owner Restitution is not less than $,00. (Dkt. No. - (a).) In some cases, Eligible Owners will receive more than the minimum $,00 to as much as $0,000. (See id.) Eligible Owners who purchased their Eligible Vehicles after September, 0 are entitled to 0% of Owner Restitution as calculated above, plus a share of an unused portion of the funds set aside to pay Seller Restitution as discussed below. (Id. (b).) Eligible Lessees are also guaranteed a Restitution Payment. (Dkt. No. -.) Lessee Restitution has two components: () a variable component plus () a fixed component. (Dkt. No. -.) The variable component is 0% of the Eligible Vehicle s Base Value adjusted for options, but not mileage. (Id.) The fixed component is $,. (Id.) Eligible Lessees are entitled to Lessee Restitution even if their leases terminated after September, 0. (Dkt. No....) For Eligible Sellers, Restitution is calculated as 0% of the Vehicle Value plus $,.. (Id. ; Dkt. No. - at,.) Eligible Sellers are guaranteed a minimum of $,0 in Seller Restitution; however, if the sum total of 0% of the Vehicle Value plus $,. is greater than $,0, the Eligible Seller is entitled to the higher amount. (Id. at.) C. Claims Process The Settlement sets forth a five-step Claims Program, and Class Members have from the date of entry of this Order until September, 0 to submit a claim. (Dkt. No..; Dkt. No. -.) Eligible Sellers, however, must identify themselves within days of entry of

8 Case :-md-0-crb Document Filed 0// Page of 0 0 this Order (the Eligible Seller Identification Period ). (Dkt. No..; Dkt. No. - (a).) At Step One, Class Members learn about their available remedies and compensation. (Dkt. No..; Dkt. No. -.) There are at least two ways Class Members can do this. Those who wish to obtain information online can visit the Settlement Website ( and register at the Online Claims Portal. There, Class Members provide their () name; () contact information, including , mailing address, and phone number; () address of vehicle registration; () Vehicle Identification Number ( VIN ); () vehicle mileage, if the Class Member is a current owner or lessee; and () information regarding vehicle financing, i.e., whether the Class Member is a current owner or lessee. (Dkt. No. - (a).) The Claims Portal will display individualized preliminary offers for each Class Member. (Id.) Alternatively, Class Members can call ---CLAIM and provide the same information to receive their individualized preliminary offers. (Id. (b).) At Step Two, Class Members submit a Claim Form that contains information about his or her Eligible Vehicle, as well as the required documentation. (Dkt. No..; Dkt. No. -.) Class Members can submit their Claim Forms online via the Settlement Website, by fax, or by mail. (Id. (a)(i)-(iii).) However Class Members choose to submit their Claim Forms, they must also provide information or documentation including: () a driver s license or other government-issued identification; () the dates the Class Member owned or leased the Eligible Vehicle; () proof of ownership, including title (if applicable) and financing or lease information, including financial consent forms (if applicable). (Id.) Class Members will receive a Claim Number once the Claim is received. (Id. ). While Class Members need not select a remedy at Step Two, they must submit their claims prior to September, 0. (Id. (a).) Eligible Sellers, however, must identify themselves within days of entry of this Order. They can do this via () electronic registration on the Settlement Website or () submission of an Eligible Seller identification form by mail or fax. (Dkt. No..; Dkt. No. - (a).) Step Three involves a determination of the Class Member s eligibility. (Dkt. No.

9 Case :-md-0-crb Document Filed 0// Page of.; Dkt. No. -.) The parties propose Ankura Consulting Group, LLC to act as Claims Supervisor and to review the submitted claims and verify a class member s eligibility. (Dkt. No..,.; Dkt. No. -.) Per the proposed FTC Consent Order, Volkswagen will notify Class Members within at least 0 business days that their claim is either complete or deficient. (Dkt. No. 0 at.) Within at least 0 business days of receiving a completed 0 0 application, Volkswagen will notify the Class Member whether he or she is eligible for the elected remedy. (Id.) The Class Member thereafter receives a formal offer if he or she is deemed an eligible Claimant. (Dkt. No. - (a).) At Step Four, Claimants confirm their selection of an offered remedy, accept the formal offer, and schedule an appointment with a Volkswagen or Audi Dealer. (Dkt. No..; Dkt. No. -.) Claimants who submitted an online Claim will receive their formal offers through the Claims Portal or via . (Id. (a).) Claimants who faxed or mailed a Claim will receive their formal offers via mail or, if they so choose, by . (Id.) Claimants may then accept their formal offers either through the Claims Portal or by submitting a paper acceptance form. (Id. (b).) Claimants need not accept an offer immediately; rather, they can defer selection until the Fix is approved or choose a different remedy if one is available. (Id.; id. (c).) Claimants eligible for a Buyback, Lease Termination, or a Fix may also change their remedy selection up until Step Four is completed, even if they have accepted a formal offer, though this may require additional documentation to verify eligibility. (Id. (b).) In other words, Claimants may wait until EPA and CARB approve a Fix, if any, before selecting their remedy. Upon formal acceptance, Claimants must also execute an Individual Release, described in more detail in Section II.F, infra. (Id.) Claimants can schedule an appointment for a Buyback or a Fix within 0 days of his or her acceptance of a formal offer. (Id. (c).) Appointments for a Lease Termination will be available within days of the Claimant s acceptance of a formal offer. (Id.) Claimants will be notified via If a claim application is deficient, Volkswagen shall have 0 business days from resubmission of the claims application to notify the Class Member whether his or her application is complete. (Dkt. No. 0 at.)

10 Case :-md-0-crb Document Filed 0// Page 0 of 0 0 the Claims Portal, , or mail when the ability to schedule an appointment is available. (Id.) Claimants schedule appointments for a Buyback or Lease Termination online through the Claims Portal or by calling ---CLAIM; they cannot schedule appointments directly with the Volkswagen or Audi Dealer. (Id. (d).) Appointments for a Fix, on the other hand, may be scheduled either by directly calling the Claimant s preferred Volkswagen or Audi Dealer or through the Claims Portal. (Id. (e).) At Step Five, Claimants obtain their selected remedy. (Dkt. No..; Dkt. No. -.) Claimants who opt for a Buyback or Lease Termination will meet with a Settlement Specialist at a Volkswagen or Audi Dealer to complete the process and receive payment. (Dkt. No. - (b).) Claimants who elect a Fix will bring their Eligible Vehicles to a Volkswagen or Audi Dealer to obtain, at Volkswagen s expense, the Approved Emissions Modification. (Id. (c).) Class Members or Claimants who dispute an eligibility determination or calculation of compensation may appeal that decision by mailing a form to the Claims Review Committee ( CRC ). (Dkt. No. -.) The CRC will be comprised of three individuals: one representative from Volkswagen, one representative from Class Counsel, and one Court-appointed individual. (Id...) D. Distribution of Settlement Payments The Settlement requires Volkswagen to create a $0.0 billion Funding Pool to compensate Class Members. (Dkt. No. at.) This figure assumes 00% Buyback of all purchased Eligible Vehicles and 00% Lease Termination of all leased Eligible Vehicles. (Id...) The $0.0 billion includes () $,0, in a Loan Forgiveness Designated Fund to pay Loan Forgiveness; () $ million in the Future Lease Payments Designated Fund to pay remaining future lease payments previously owed to VW Credit, Inc. for those Eligible Lessees choosing Lease Termination; and () $,,, in the Principal Fund to pay Vehicle Value, Owner Restitution, Lessee Restitution, and Seller Restitution. (Id.) The Loan Forgiveness Designated Fund, Future Lease Payments Designated Fund, and Principal Fund cannot be used for any funding purposes other than those stated above. (Id.) Any unused funds in the Funding Pool 0

11 Case :-md-0-crb Document Filed 0// Page of 0 0 will revert to Volkswagen upon the completion of the Class Action Settlement Program. (Id.) Claimants may elect to receive their Buyback and Restitution Payments either by electronic fund transfer or by check. (Dkt. No. - (d).) An electronic fund transfer will be submitted within three banking days upon () the sale or surrender of the Eligible Vehicle; () completion of a Fix; or () for Eligible Sellers and Eligible Lessees who no longer own or lease an Eligible Vehicle, acceptance of an offer. (Id. (d)(i).) Claimants who select a Buyback or Lease Termination and payment by check will receive a check for the full amount due at the Dealership Appointment, unless a mileage adjustment is required. (Id. (d)(ii).) If an upward mileage adjustment is required, the Claimant will not receive a check at the Dealership Appointment but will instead be mailed a check within three banking days. (Id.) If a downward mileage adjustment is required, the Claimant will receive a check at the Dealership Appointment and will be mailed a second check within three banking days for the additional amount due. (Id.) Claimants who select a Fix and payment by check will have a one mailed to them within three banking days of the completed Fix. (Id.) Claimants with Generation Vehicles require a two-stage modification process and thus will receive two-thirds of the Restitution Payment upon completion of the first stage and the remaining one-third of the Restitution Payment upon completion of the second stage. (Id. (d)(iii); Dkt. No....) The second stage of the Fix will also include a free oil change with respective engine oil filter. (Id.) E. Opt Out Procedure and Objections Class Members may request exclusion from the Settlement by mailing a signed, written request stating their desire in clear and unambiguous language, such as I wish to exclude myself from the Class in In re Volkswagen Clean Diesel Marketing, Sales Practices and Products Liability Litigation, No. -md-, to the Notice Administrator on or before the Opt-Out Deadline of September, 0. (Id...) The written request must also include () the Class Member s printed name, address, and telephone number; () VIN of the Eligible Vehicle; () a statement as to whether the class member is an Eligible Owner, Eligible Lessee, or Eligible Seller; and () the dates of the Class Member s ownership or lease of the Eligible Vehicle. (Id.) If the

12 Case :-md-0-crb Document Filed 0// Page of 0 0 Class Member no longer owns or leases the Eligible Vehicle, he or she must also provide evidence of the Vehicle s sale or lease expiration or termination. (Id.) The Class Notice shall advise that Class Members may object to the Settlement by filing with the Court a written objection that explains why he or she believes the Court should not approve the Class Action Settlement as fair, reasonable, and adequate. (Id...) The written objection must include () a detailed statement of and specific reasons for the objection; () the Class Member s name, address, and telephone number; () the VIN of the Eligible Vehicle; () the dates of the Class Member s ownership or lease of the Eligible Vehicle; () a statement as to whether the Class Member is an Eligible Owner, an Eligible Lessee, or an Eligible Seller; () a statement that the Class Member has reviewed the Class definition and has not opted out of the Class; and () other supporting documents the class member wishes the Court to consider. (Id.) Class Members may object on their own behalf or through counsel, at the Class Member s own expense. (Id...) F. Release of Claims Class Members agree to release all Released Claims against Released Parties. The Settlement defines Released Parties as () Volkswagen AG, Volkswagen Group of America, Inc. (d/b/a Volkswagen of America, Inc. or Audi of America, Inc.), Volkswagen Group of America Chattanooga Operations, LLC, Audi AG, Audi of America, LLC, VW Credit, Inc., VW Credit Leasing, Ltd., VCI Loan Services, LLC, and any former, present, and future owners, shareholders, directors, officers, employees, attorneys, affiliates, parent companies, subsidiaries, predecessors, and successors of any of the foregoing (the VW Released Entities ); () any and all contractors, subcontractors, and suppliers of the VW Released Entities; () any and all persons and entities indemnified by any VW Released Entity with respect to the.0-liter TDI Matter; () any and all other persons and entities involved in the design, research, development, manufacture, assembly, testing, sale, leasing, repair, warranting, marketing, advertising, public relations, promotion, or distribution of any Eligible Vehicle, even if such persons are not specifically named in this paragraph, including without limitation all Volkswagen Dealers, as well as nonauthorized dealers and sellers; () Claims Supervisor; () Notice Administrator; () lenders, creditors, financial institutions, or any other parties that financed any purchase or lease of an Eligible Vehicle; and

13 Case :-md-0-crb Document Filed 0// Page of 0 0 () for each of the foregoing, their respective former, present, and future affiliates, parent companies, subsidiaries, predecessors, successors, shareholders, indemnitors, subrogees, spouses, joint ventures, general or limited partners, attorneys, assigns, principals, officers, directors, employees, members, agents, representatives, trustees, insurers, reinsurers, heirs, beneficiaries, wards, estates, executors, administrators, receivers, conservators, personal representatives, divisions, dealers, and suppliers. (Dkt. No...) The Settlement does not, however, release any claims against Robert Bosch GmbH; Robert Bosch, LLC; or any of its any of its former, present, and future owners, shareholders, directors, officers, employees, attorneys, affiliates, parent companies, subsidiaries, predecessors, or successors. (Id.; Dkt. No. -.) Released Claims include (Dkt. No...) any and all claims, demands, actions, or causes of action of any kind or nature whatsoever, whether in law or in equity, known or unknown, direct, indirect or consequential, liquidated or unliquidated, past, present or future, foreseen or unforeseen, developed or undeveloped, contingent or noncontingent, suspected or unsuspected, whether or not concealed or hidden, arising from or in any way related to the.0-liter TDI Matter, including without limitation () any claims that were or could have been asserted in the Action; and () any claims for fines, penalties, criminal assessments, economic damages, punitive damages, exemplary damages, liens, injunctive relief, attorneys, expert, consultant, or other litigation fees or costs other than fees and costs awarded by the Court in connection with this Settlement, or any other liabilities, that were or could have been asserted in any civil, criminal, administrative, or other proceeding, including arbitration. Class Members expressly waive and relinquish any rights they may have under California Civil Code section or similar federal or state law. (Id..; Dkt. No. - ); see Cal. Civ. Code ( A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor. ). Class Members who receive a Buyback, a Fix, a Lease Termination, and/or a Restitution Payment must execute an Individual Release during Step of the Claims Process as a condition of obtaining such relief. (Dkt. No..; Dkt. No. - (b); see Dkt. No. -.) The Individual Release becomes effective and binding once the Class Member receives a benefit under the Settlement. (Dkt. No. - (b); Dkt. No. - ().)

14 Case :-md-0-crb Document Filed 0// Page of 0 G. Attorneys Fees and Costs Volkswagen will pay reasonable attorneys fees and costs for work performed by Lead Plaintiffs Counsel and the PSC (collectively, Class Counsel ), as well as other attorneys designated by Class Counsel to perform work in connection with this MDL, excluding work performed on MDL cases brought under the securities laws, for physical injury, and on behalf of Volkswagen or competitive dealers. (Dkt. No...) Attorneys fees are subject to the Court s approval. (Id.) Although Class Counsel and Volkswagen have not yet discussed attorneys fees and costs, they agree to attempt to negotiate those amounts to be paid after the execution of this Settlement and any settlement agreement concerning the.0-liter diesel engine vehicles. (Id.) If the parties have not reached such a settlement by August, 0, Class Counsel and Volkswagen will begin negotiations as to attorneys fees and costs to be paid in connection with claims involving the.0-liter engine vehicles. (Id.) Class Counsel and Volkswagen will either submit a negotiated amount to the Court or litigate the fee issues if the parties disagree on the amount. (Id.) III. LEGAL STANDARD 0 [T]here is a strong judicial policy that favors settlements, particularly where complex class action litigation is concerned. Allen v. Bedolla, F.d, (th Cir. 0) (quoting In re Syncor ERISA Litig., F.d 0, 0 (th Cir. 00)). Nevertheless, Federal Rule of Civil Procedure ( Rule ) (e) requires courts to approve any class action settlement. [S]ettlement class actions present unique due process concerns for absent class members. Hanlon v. Chrysler Corp., 0 F.d 0, 0 (th Cir. ). As such, the district court has a fiduciary duty to look after the interests of those absent class members. Allen, F.d at (collecting cases). Preliminary approval of a class action settlement generally requires two inquiries. Cotter v. Lyft, Inc., 0 WL, at * (N.D. Cal. Apr., 0). Courts first assess whether a class exists. Amchem Prods. Inc. v. Windsor, U.S., 0 (). This is of vital importance, for a court asked to certify a settlement class will lack the opportunity, present when a case is litigated, to adjust the class, informed by the proceedings as they unfold. (Id.) Second, Rule

15 Case :-md-0-crb Document Filed 0// Page of (e) requires courts to determine whether a proposed settlement is fundamentally fair, adequate, and reasonable. Hanlon, 0 F.d at 0; see Fed. R. Civ. P. (e)(). IV. DISCUSSION 0 0 A. Class Certification Class certification is a two-step process. See Amchem Prods., Inc., U.S. at. The Settlement Class Representatives must first satisfy Rule (a) s four requirements: () numerosity, () commonality, () typicality, and () adequacy of representation. Fed. R. Civ. P. (a)()-(). [C]ertification is proper only if the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule (a) have been satisfied[.] Wal-Mart Stores, Inc. v. Dukes, U.S., 0- (0) (internal quotations omitted). The Settlement Class Representatives must then establish that a class action may be maintained under either Rule (b)(), (), or (). See Amchem Prods., Inc., U.S. at. The Settlement Class Representatives seek certification under Rule (b)(), which is appropriate when questions of law or fact common to Class Members predominate and a class action is the superior means to other available methods to resolve the controversy. Fed. R. Civ. P. (b)().. Rule (a) a. Numerosity Rule (a)() requires the class to be so numerous that joinder of all parties is impracticable. Fed. R. Civ. P. (a)(). A specific minimum number is not necessary, and [a] plaintiff need not state the exact number of potential class members. Richie v. Blue Shield of Cal., 0 WL, at * (N.D. Cal. Dec., 0). The numerosity requirement is easily satisfied. There were, Eligible Vehicles sold or leased to consumers in the United States, and thus hundreds of thousands of potential Class Members. Rule (a)() is met because joinder is impossible. See Palmer v. Stassinos, F.R.D., (N.D. Cal. 00) ( Joinder of,000 or more co-plaintiffs is clearly impractical. ). b. Commonality Rule (a)() mandates the existence of questions of law or fact common to the class. Fed. R. Civ. P. (a)(). The existence of shared legal issues with divergent factual predicates is

16 Case :-md-0-crb Document Filed 0// Page of 0 0 sufficient, as is a common core of salient facts coupled with disparate legal remedies within the class. Hanlon, 0 F.d at 0. Assessing commonality requires courts to have a precise understanding of the nature of the underlying claims. Parsons v. Ryan, F.d, (th Cir. 0) (citing Amgen Inc. v. Conn. Ret. Plans & Trust Funds, S. Ct., (0); additional citation omitted). This allows courts to determine if the class claims... depend upon a common contention that is of such a nature that it is capable of classwide resolution which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke. Dukes, U.S. at 0. The commonality analysis does not turn on the number of common questions, but on their relevance to the factual and legal issues at the core of the purported class claims. Jimenez v. Allstate Ins. Co., F.d, (th Cir. 0), cert. denied, S. Ct. (0). Rather, a single common question of law or fact satisfies the Rule. Dukes, U.S. at. The Settlement Class Representatives satisfy the commonality requirement, as their claims arise from Volkswagen s common course of conduct. Specifically, the common questions of fact are () Volkswagen s fraudulent scheme to deceive state and federal regulatory authorities by installing in its.0-liter diesel engine vehicles the defeat device designed, and () Volkswagen s false and misleading marketing campaign that misrepresented and omitted the true nature of the Eligible Vehicles clean diesel engine system. (Dkt. No. 0 at 0.) Without class certification, individual Class Members would be forced to separately litigate the same issues of law and fact which arise from Volkswagen s use of the defeat device and Volkswagen s alleged common course of conduct. See In re Celera Corp. Sec. Litig., 0 WL 0, at * (N.D. Cal. Feb., 0) (finding commonality requirement met where plaintiffs raised questions of law or fact that would be addressed by other putative class members pursuing similar claims). As such, the Settlement Class Representatives have satisfied Rule (a)(). c. Typicality Rule (a)() requires that the representative parties claims be typical of the claims or defenses of the class. Fed. R. Civ. P. (a)(). Typicality assure[s] that the interest of the named representative aligns with the interests of the class. Wolin v. Jaguar Land Rover N. Am.,

17 Case :-md-0-crb Document Filed 0// Page of 0 0 LLC, F.d, (th Cir. 00) (quoting Hanon v. Dataproducts Corp., F.d, 0 (th Cir. )). Under this permissive rule, representative claims are typical if they are reasonably coextensive with those of absent class members; they need not be substantially identical. Parsons, F.d at (quoting Hanlon, 0 F.d at 00). The test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct. Evon v. Law Offices of Sidney Mickell, F.d 0, 00 (th Cir. 0) (quoting Hanon v. Dataproducts Corp., F.d, 0 (th Cir. )). The typicality requirement is met. The Settlement Class Representatives claims are based on the same pattern of wrongdoing as those brought on behalf of Class Members. The Settlement Class Representatives, as well as Class Members, purchased or leased an Eligible Vehicle equipped with a defeat device. Their claims are typical because they were subject to the same conduct as other Class Members, and as a result of that conduct, the Settlement Class Representatives and Class Members suffered the same injury. As such, the Court finds Rule (a)() is satisfied. d. Adequacy of Representation Rule (a)() requires that the representative party be able to fairly and adequately protect the interests of the class. Fed. R. Civ. P. (a)(). This requirement is rooted in due-process concerns absent class members must be afforded adequate representation before entry of a judgment which binds them. Radcliffe v. Experian Info. Sols. Inc., F.d, (th Cir. 0) (quoting Hanlon, 0 F.d at 00). Courts engage in a dual inquiry to determine adequate representation and ask: () do the named plaintiffs and their counsel have any conflicts of interest with other Class Members and () will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the class? Evon, F.d at 0 (quoting Hanlon, 0 F.d at 00). First, nothing in the record suggests the Settlement Class Representatives or Class Counsel have any conflicts of interests with other potential Class Members. There are named Settlement Class Representatives hailing from states. (See Dkt. No. 0-.) The Settlement

18 Case :-md-0-crb Document Filed 0// Page of 0 0 Class Representatives affirm they and Class Members are entirely aligned in their interest in proving that Volkswagen misled them and share the common goal of obtaining redress for their injuries. (Dkt. No. 0 at.) The Court finds no reason to believe otherwise. Second, the Court is satisfied that the Settlement Class Representatives and Class Counsel have and will continue to vigorously prosecute this action on behalf of the class. The Settlement Class Representatives have actively participated in this litigation by providing Class Counsel with factual information concerning the purchase or lease of their Eligible Vehicle, which assisted in the drafting of the Consolidated Complaint. (Id.) Representative Plaintiffs also submitted detailed verified Plaintiff Fact Sheets during discovery, provided relevant documents and information, assisted in the preparation of discovery responses, and communicated regularly with Class Counsel. (Id.) Finally, there are no doubts regarding Class Counsel s adequacy. The Court appointed Lead Plaintiffs Counsel and the PSC members after a competitive application process, during which the Court received approximately 0 applications. They are qualified attorneys with extensive experience in consumer class action litigation and other complex cases. The extensive efforts undertaken thus far in this matter are indicative of Lead Plaintiffs Counsel s and the PSC s ability to prosecute this action vigorously. The Court therefore finds the Settlement Class Representatives and Class Counsel are adequate representatives. e. Summary The Settlement Class Representatives meet all four Rule (a) requirements for purposes of preliminary approval. Plaintiffs next must show that the action is maintainable under Rule (b)(), (), or (). Amchem Prods., Inc., U.S. at. Plaintiffs seek certification pursuant to Rule (b)(). (Dkt. No. 0 at -.). Rule (b)() A class action may be maintained under Rule (b)() when the court finds [] that the questions of law or fact common to class members predominate over any questions affecting only individual members, and [] that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy[.] Fed. R. Civ. P. (b)().

19 Case :-md-0-crb Document Filed 0// Page of 0 0 Rule (b)() s predominance criterion is even more demanding than Rule (a). Comcast Corp. v. Behrend, S. Ct., (0). The Rule (b)() analysis presumes that the existence of common issues of fact or law have been established pursuant to Rule (a)(); thus, the presence of commonality alone is not sufficient to fulfill Rule (b)(). Hanlon, 0 F.d at 0. Instead, [t]he predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation and requires courts to give careful scrutiny to the relation between common and individual questions in a case. Tyson Foods, Inc. v. Bouaphakeo, S. Ct. 0, 0 (0) (quoting Amchem Prods., U.S. at ). Predominance is found [w]hen common questions present a significant aspect of the case and they can be resolved for all members of the class in a single adjudication[.] Hanlon, 0 F.d at 0 (internal quotations omitted). This case meets Rule (b)() s predominance requirement. Plaintiffs allege Volkswagen perpetrated the same fraud in the same manner against all Class Members. If the Court were to find that Volkswagen has indeed engaged in a deceptive and fraudulent scheme, such a finding would apply to all of the Class Members claims. Plaintiffs also allege a common and unifying injury, as their and other Class Members injuries arise solely from Volkswagen s use of the defeat device. As such, the Court finds predominance is met. The superiority test is also satisfied. This inquiry requires the court to determine whether maintenance of this litigation as a class action is efficient and whether it is fair. Wolin, F.d at -. If Class Members were to bring individual lawsuits against Volkswagen, each Member would be required to prove the same wrongful conduct to establish liability and thus would offer the same evidence. Given that Class Members number in the hundreds of thousands, there is the potential for just as many lawsuits with the possibility of inconsistent rulings and results. Thus, classwide resolution of their claims is clearly favored over other means of adjudication, and the proposed Settlement resolves Class Members claims at once. As such, class action treatment is superior to other methods and will efficiently and fairly resolve the controversy. //

20 Case :-md-0-crb Document Filed 0// Page 0 of 0 0. Summary Plaintiffs satisfy the Rule (a) and (b)() requirements. The Court therefore certifies the proposed Class for settlement purposes. B. Preliminary Fairness Determination The Ninth Circuit has identified eight factors courts should consider to determine whether a settlement agreement is fair, adequate, and reasonable: () the strength of the plaintiff s case; () the risk, expense, complexity, and likely duration of further litigation; () the risk of maintaining class action status throughout the trial; () the amount offered in settlement; () the extent of discovery completed and the stage of the proceedings; () the experience and views of counsel; () the presence of a governmental participant; and () the reaction of the class members of the proposed settlement. In re Bluetooth Headset Prods. Liab. Litig., F.d, (th Cir. 0) (citation omitted). Courts must examine the settlement taken as a whole, rather than the individual component parts for fairness. Hanlon, 0 F.d at 0. Courts cannot delete, modify or substitute certain provisions of the settlement. (Id. (internal quotations omitted).) But where, as here, the parties negotiate a settlement before a class has been certified, courts must peruse the proposed compromise to ratify both the propriety of the certification and the fairness of the settlement. Staton v. Boeing Co., F.d, (th Cir. 00). Pre-class certification settlements must withstand an even higher level of scrutiny for evidence of collusion or other conflicts of interest than is ordinarily required under Rule (e) before securing the court s approval as fair. In re Bluetooth, F.d at (citing Hanlon, 0 F.d at 0). This heightened scrutiny ensure[s] that class representatives and their counsel do not secure a disproportionate benefit at the expense of the unnamed plaintiffs who class counsel had a duty to represent. Lane v. Facebook, Inc., F.d, (th Cir. 0) (quoting Hanlon, 0 F.d at 0). As such, courts must evaluate the settlement for evidence of collusion. (Id.) Because [c]ollusion may not always be evident on the face of a settlement,... courts therefore must be particularly vigilant not only for explicit collusion, but also for more subtle signs that class counsel have allowed pursuit of their own self-interests and that of certain class members to infect the negotiations. In Re Bluetooth, F.d at. In In Re Bluetooth, the 0

21 Case :-md-0-crb Document Filed 0// Page of 0 0 Ninth Circuit identified signs of subtle collusion including, but not limited to, () when counsel receive a disproportionate distribution of the settlement, or when the class receives no monetary distribution but class counsel are amply rewarded, () when the parties negotiate a clear sailing arrangement providing for the payment of attorneys fees separate and apart from class funds, which carries the potential of enabling a defendant to pay class counsel excessive fees and costs in exchange for counsel accepting an unfair settlement on behalf of the class ; and () when the parties arrange for fees not awarded to revert to defendants rather than be added to the class fund[.] Id. (internal quotations and citations omitted). However, courts need not assess all of these fairness factors at the preliminary approval stage. See Alberto v. GMRI, Inc., F.R.D., (E.D. Cal. 00). Rather, the preliminary approval stage [i]s an initial evaluation of the fairness of the proposed settlement made by the court on the basis of written submissions and informal presentation from the settling parties. In re High-Tech Empl. Antitrust Litig., 0 WL, at * (N.D. Cal. Oct. 0, 0) (citing Manual for Complex Litigation (Fourth).). At this stage, [p]reliminary approval of a settlement is appropriate if the proposed settlement appears to be the product of serious, informed, non-collusive negotiations, has no obvious deficiencies, does not improperly grant preferential treatment to class representatives or segments of the class, and falls within the range of possible approval. Ruch v. AM Retail Grp., Inc., 0 WL, at * (N.D. Cal. Mar., 0) (quoting In re Tableware, F. Supp. d 0, 0 (N.D. Cal. 00)). Ultimately, [t]he initial decision to approve or reject a settlement proposal is committed to the sound discretion of the trial judge. Officers for Justice v. Civil Serv. Comm n of City & Cty. of San Francisco, F.d, (th Cir. ).. Settlement Process The Court first considers the means by which the parties arrived at settlement. Preliminary approval is appropriate if the proposed settlement is the product of serious, informed, non-collusive negotiations. The Settlement is the end result of such negotiations. Class Counsel received and analyzed huge volumes of discovery. (Dkt. No. 0 at.) This review allowed them to make a well-informed assessment of the merits of the Class claims and to determine

22 Case :-md-0-crb Document Filed 0// Page of 0 0 whether Volkswagen s offers adequately compensates Class Members for their injuries. At the hearing, Class Counsel explained that they had the assistance of auto industry experts, which allowed them to test and analyze for themselves the data provided by Volkswagen. Moreover, Class Counsel conducted surveys of Class Members so they could evaluate Class Members goals regarding and reactions to various settlement proposals. The Settlement is also the result of arm slength negotiations by experienced Class Counsel and thus is entitled to an initial presumption of fairness. In re High-Tech Empl., 0 WL, at * (quoting Newberg on Class Actions. (th ed. 00)). Moreover, Class Counsel negotiated the Settlement alongside government entities, including EPA and FTC. (Dkt. No. 0 at.) While those entities are not technically parties to the Settlement currently before the Court for preliminary approval, their coordination with Class Counsel and support of the Settlement weigh in favor of granting preliminary approval. Further, the parties negotiated the Settlement under the supervision of the Court-appointed Settlement Master. While the mere presence of a neutral mediator, though a factor weighing in favor of a finding of non-collusiveness, is not on its own dispositive of whether the end product is a fair, adequate, and reasonable settlement agreement[,] In re Bluetooth, F.d at, on balance, the Settlement Master s guidance coupled with informed dialogues and the intensive involvement of government entities suggests the parties reached the Settlement after serious, informed, non-collusive negotiations. This factor therefore weighs strongly in favor of preliminary approval.. The Presence of Obvious Deficiencies The second consideration is whether the Settlement contains any obvious deficiencies. The Court finds no glaring concerns at this time. The first Bluetooth factor asks whether class counsel receive a disproportionate distribution of the settlement or whether counsel are amply rewarded while the class receives no monetary distribution. (Id.) At this point, this factor is not problematic. As the parties have not yet negotiated attorneys fees, the Court cannot yet determine if the first situation exists, that is, whether the Settlement awards Class Counsel a disproportionate distribution of the settlement